Regional outlook Europe

Economic and political review of the continent

This regional study on Europe focuses on the economic outlook and risks for the entire region, but also on the differences between countries within the area. The purpose of the study is to both benchmark European countries on economic developments and fundamentals and to create a comprehensive view on where Europe’s economies are heading. This is done by covering the topics macroeconomic developments, political developments, population trends, (public) debt challenges and institutional quality.

While the results show trends that apply to the broad region, like ageing and increased euroscepticism, they also provide some useful insights on differences, for example in the growth outlook, debt sustainability and institutional quality. One of the main takeaways is that the Baltics and some of the CEE countries have the potential to outperform countries in Southern Europe and in the SEE region. Another is that whilst Southern, Eastern and South-Eastern countries are sensitive to risks of affordability and financing of sovereign debt, the sustainability of sovereign debt is a predominantly Southern and Western European challenge.

Macroeconomic developments in EuropeWe expect growth in Europe to accelerate gradually, although the economy has far from fully recovered from the Global Financial Crisis. Substantial deterioration in the Greek situation and/or the geopolitical conflicts remain downside risks.

Politics - European trends, national consequencesEuropean countries face a number of internal destabilising political trends while externally they continue to face threats, particularly from Russia. Meanwhile, TTIP and the Juncker administration may add some geopolitical clout to the EU.

Europe’s (public) debt challengePrivate and public sector debt is high in many European countries. Public debt challenges seem to be the greatest in Southern European countries, Croatia and Hungary; and lowest in the Nordics and Baltics. Some Western European countries face quite substantial public debt sustainability challenges.